The Bank Of Mum And Dad Stephanie Hawthorne, award-winning financial journalist, writes for us.

THE Bank of Mum and Dad is Britain’s favourite financial institution. With average house prices an astonishing seven times salary, it’s not surprising that first-time buyers in particular need a helping hand from their parents (not to mention uncles and aunts and grans and grandpas) to get a foot on the housing ladder.

According to Legal & General research, the average gift for house purchase is £17,500.

Many “baby boomers” will have seen their homes rise enormously in value and would like to do something for their children. If you have spare cash, the simplest approach is simply to make a gift to your children.

Other alternatives are to make a no-interest loan or a loan with interest. I prefer making gifts – there is no guarantee that children will ever be able to repay the money and there will be bad blood and arguments if you are expecting money to be repaid which is not forthcoming.

Mums and dads should be wary of being overly bountiful. As well as asking your children to make a budget, make a budget yourself – can you really afford to be that generous? Are you being unduly pressurised?

Check out your current account and credit card statements for the past three months and longer for larger outgoings to make sure you won’t really miss the cash, and get your children to do the same.

It can be very hard to refuse requests for cash, but don’t let your heart rule your head. Be practical.

Will a one-off loan become an incessant demand for more cash? It is all very well helping your children fend off rapacious payday loan companies and doorstep lenders with interest-free cash, but what if your children keep coming back for more?

And how will you feel if your children come back to you some months down the line and say they can’t afford to repay you?

Don’t be too informal about this. It is always a good idea when you lend money to family to record it in writing together with their proposed repayment plan.

Additionally, although no-one wants to think about this, if the borrower died before he or she had repaid the loan, you need documentary evidence to claim the money back from their estate.

Some parents and indeed grandparents are lucky enough to be sitting on big pension pots, but tread extremely warily before cashing them in – you may think you are rich with hundreds of thousands of pounds in your pot but this may have to last you for an extraordinarily long time. Britain’s oldest man has just celebrated his one hundred and ninth birthday.

There is another danger, too. Under the pension freedoms reforms, most pension savers over the age of fifty-five are entitled to take some of their pension savings in the form of a tax-free cash lump sum with the first 25% being tax-free. If you take any more than that out, you could face a one-off tax bill or pay tax at a higher rate than you usually do.

Another way to raise cash is equity release, which can be a dangerous trap. Here you take out a lifetime mortgage on the property which is repaid when you die or go into care, with the interest rolling up – you often pay interest on interest and the loan may triple in size in 20 years.

A lifetime mortgage will reduce the amount of inheritance you will be able to leave, and it could affect both the tax you pay and any welfare benefits you receive.

It may be simpler just to downsize to release cash.

It’s great to help your loved ones, but look before you leap.